Why experts say a higher federal minimum wage rate is long overdue

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A restaurant worker during a May 26, 2021 “wage strike” protest organized by One Fair Wage in Washington, DC

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Workers earning minimum wage are enjoying increased incomes in some parts of the United States, thanks to new, higher minimum wage rates that went into effect in July.

Connecticut, Nevada, Oregon and Washington, DC all had new, higher minimum wages as of July 1. The increases come as the federal minimum wage stands at $7.25 an hour, unchanged since 2009.

President Joe Biden has advocated for an increase in the federal minimum wage to $15 an hour for all workers. In January, an executive order he signed that raised the minimum wage to $15 an hour for federal workers and contractors went into effect.

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But efforts to raise the federal pay rate more broadly were ruled ineligible for inclusion in budget reconciliation legislation last year.

“At the moment, it seems somewhat stalled,” said Pamela Loprest, senior research fellow at the Urban Institute’s Income and Benefits Policy Center, of efforts to raise the federal minimum wage.

Meanwhile, some states and localities have addressed the issue, with Florida and Delaware moving to a minimum wage of $15 an hour. Companies, such as Amazon, Target and Walmart, have also stepped up efforts to establish higher minimum wage rates for employees.

HERE’S WHERE THE MINIMUM WAGE INCREASES

Connecticut:

  • The minimum wage went from $13 to $14 an hour. It is expected to increase again to $15 an hour starting next June.

Nevada:

  • Employees without health insurance: The minimum wage is now $10.50 per hour, down from $9.75 previously, and will gradually increase to $12 per hour in 2024.
  • Employees receiving benefits: The minimum wage is $9.50, down from $8.75, and will gradually increase to $11 in 2024.

Oregon:

  • The standard minimum wage rises to $13.50 an hour from $12.75 previously.
  • Portland’s metro rate goes up to $14.75 an hour, from $14 previously.
  • The non-urban county minimum wage is now $12.50 an hour, down from $12 previously.

Washington D.C.:

  • The minimum wage is now $16.10 per hour, down from $15.20 previously.

“It seems to be an alternative in the deadlock of federal changes,” Loprest said. “It’s definitely the best way to bring about change.”

How higher wages can help businesses

While some argue that higher minimum wages could burden small businesses, the opposite is actually true, says Holly Sklar, CEO of Business for a Fair Minimum Wage.

“If you have a worker at one company, they are customers at many other companies,” Sklar said.

“It’s a really, really good way to drive consumer demand, to put money in the pockets of local customers for local businesses,” she said.

Paul Saginaw, co-owner of Saginaw’s Delicatessen in Las Vegas, said he was happy to see Nevada’s minimum wage increase, although he already pays employees a higher rate of at least $14 an hour.

“I don’t think I’ve ever paid anyone minimum wage in my entire life,” said Saginaw, who is also a co-owner of businesses in Ann Arbor, Michigan.

“If our employees have less financial stress, they’ll stay at work longer, they’ll be more loyal,” Saginaw said. “Our turnover figures are well below those of the industry.”

Job offers and voluntary departures are still at record highs, according to the the latest government data, indicating a continuing trend of resignation among workers that has been dubbed the Great Resignation.

Persistent inflation may make it harder to raise wages

Prices at the Chipotle Mexican Grill rose about 4% to cover the cost of raising the chain’s minimum wage to $15 an hour. Pictured are Chipotle employees in Houston.

Brandon Bell | Getty Images News | Getty Images

To be sure, high inflation has made it more difficult to deliver pay raises and has also challenged the company to find ways to cut unnecessary costs to avoid raising prices, Saginaw said.

Some economists have expressed concern that a higher federal minimum wage could fuel inflation, an idea Biden rejected amid calls for a $15-an-hour minimum wage.

What’s more, a higher minimum wage is unlikely to make inflation worse, because low-wage jobs aren’t concentrated in industries that are fueling rising prices, according to David Cooper, director of the Analysis and Research Network. economic research at the Institute of Economic Policy.

The federal minimum wage has lost about 26% of its value since it was last changed in 2009, and about 40% since 1968, he said.

While state and city efforts to raise minimum wage rates are helpful, there are still about 20 states that base their minimum wage on federal rates.

“It would be much better if we just raised the federal minimum wage” and did what those states and cities are already doing, which is building in an automatic adjustment for inflation or wage changes, Cooper said.

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